The loan was to be the primary funding mechanism to build a wastewater treatment facility off Route Y as part of the first phase of a six-phase sewer project.

Parker Pauley praised the district's efforts to improve the environmental quality of the north shore area, but outlined several reasons why DNR denied the loan.

The letter said the loan application, which included numerous documents, "do not support a conclusion that the project is adequately developed."

The issues DNR identified include:

•Fluctuating user rates

•Lack of consistency in the number of connections to the facility

•Volunteers — not licensed operators — slated to operate and maintain the facility

•Operating budget deemed too low

•No plan to implement a shutoff resolution for dealing with multiple units on a single grinder pump

•Contingency funds inadequate to support full execution of the proposed project

•The district's reluctance to pursue funding from the Community Development Block Grant program

Despite the concerns, the sewer district board hopes to move forward with the project within the next few months.

"We are hoping to get final approval in the near future — probably in January," board secretary Peggy Cochran said, although it's unclear how the district will get approval.

In the original plan for the facility, "volunteers from our Board of Trustees, from the Gravois Mills Board of Trustees and manager, from our engineering firm, from Lake Ozark Watershed Alliance, from Lake Environmental, and several others," were going to operate the facility, Cochran said.

The district's financial plan and low budgets were primary factors for the denial of the loan — something the use of volunteers was supposed to alleviate.

"We believe that the contingency funds are sufficient given the commitment from the company that was awarded the bid and that the volunteers will take care of the low operational budget," Cochran said.

The news wasn't all bad for the district, however. DNR identified a possible course of action to obtain the financing necessary to begin construction on the facility. Should the district acquire funding privately and successfully maintain the operation of a facility for two years, the SRF program would consider a refinancing application, which would lower the district's payment.

DNR recommended to secure private funding, the district "may want to seriously consider obtaining a financial commitment from 80 percent of the rate payers that would pay two years of connection and service charges as earnest money."

Parker Pauley noted DNR's willingness to work with the district "to reach the best outcome for the residents and businesses of the area."

“We fought as hard as we could for this plan,” he said. “The whole process got confusing for all sides as we brought new ideas to the table to make it acceptable to MDNR. We will get a project. It will not look exactly as the one presented, but we will get a project in the ground.”

The denial of a SRF loan is another setback for the project. The district decided to change the location of the facility from the headwaters of Blue Spring Creek to the Route Y in January after residents along Blue Spring Creek mounted a strong protest to plan. Then, in summer 2013, the Lick Branch Cove Homeowners Association filed a lawsuit in Morgan County against the district, claiming the facility would harm the overall well-being of the cove and its inhabitants. The HOA settled with the district, providing that no other homes outside those on phase one be connected to the treatment facility.